Forecasting Portfolio Balance Using Return Mean, Standard Deviation and Spending

Jeffry Haber, Andrew Braunstein


This paper develops an integrated formula using return mean, standard deviation and spending to forecast the ending balance of a portfolio. The forecasted ending balances were robust when tested over a variety of time periods, spending percentages, and varying how the spending was calculated.This formula is useful for a variety of stakeholders – for government regulators to see how a change in required spending percentages would affect the long-term viability of institutions, for those institutions in understanding how the standard deviation (as a proxy for volatility) affects the portfolio balance, and for investment committees in understanding the trade-off between return and volatility and the resultant effect on the portfolio, among others.

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International Journal of Financial Research
ISSN 1923-4023(Print)ISSN 1923-4031(Online)


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